Arconic board defends CEO against fund's proxy challenge

The board at Arconic is defended CEO Klaus Kleinfeld Monday after a hedge fund announced a campaign to unseat him and some of the company's directors.

Arconic, which separated from Alcoa three months ago, is facing a proxy challenge from its biggest shareholder, Elliot Management, which last week named five nominees for Arconic's 13-member board. It also provided its own ideas on who should lead the company, which makes lightweight metal products for the aerospace and auto industries.

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Elliott said the company has underperformed and needs new leadership.

Arconic's independent directors — the 12 other than Kleinfeld — praised the CEO in a letter to shareholders. They said Kleinfeld, who became Alcoa CEO in 2008, steered the company through a long slump in aluminum prices, then grew the metal-products business that became Arconic Inc.

They said that the split unlocked value for shareholders and created two strong companies.

The directors noted that Arconic's shares rose 19.5 percent from the closing price on Nov. 1, the day the separation took effect, and Jan. 27, before published reports about shareholders seeking to oust Kleinfeld. The directors' use of the Nov. 1 closing price allowed them to ignore a sharp drop in the stock that day, when Arconic shares opened at $22.24 but closed at $18.92.

The shares gained just 2 percent from the Nov. 1 opening price to Jan. 27, but they have climbed since news broke about the proxy fight.